Is Zendesk a good stock to buy?

Why is Zendesk share price increasing today?

Zendesk said on Thursday it had rejected an acquisition offer from a consortium of private equity firms for as much as US$16 billion. Zendesk shares jumped 10.7% on Thursday to close at US$114.18, giving it a market value of $13.88 billion.

The investors, including hedge fund Jana Partners, want the company to abandon its proposed US$3.9 billion all-stock acquisition of SurveyMonkey parent Momentive Global, which it agreed in October. The transaction was met with a dramatic sell-off in both companies as investors balked at the tie-up.

Is Zendesk overvalued?

At its current price of $114.18 per share and the market cap of $13.88 billion, Zendesk stock is believed to be modestly overvalued. Zendesk is overvalued based on its PB Ratio (24.56x) compared to the US Software industry average (4.8x).

Because Zendesk is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 27.6% over the past three years and is estimated to grow 25.55% annually over the next three to five years.

Is Zendesk a good investment?

Full year 2021 revenue increased 30% year-over-year to $1.339 billion